Energy Chamber urges caution around contract renegotiations

The Energy Chamber fully supports the Government’s stated position that the people of Trinidad and Tobago must receive a fair economic rent for the extraction of our natural resources. The challenge for any Government in a resource rich country is to put in place the legislation, systems, policies, procedures and contractual provisions to ensure that this takes place.

To create value from its natural resources, Governments often need to attract very significant levels of investment from companies who possess the capital, the right technical know-how and the experience to safely and effectively monetize these resources. As the Prime Minister stated, this involves creating a stable partnership between the State and the oil and gas companies; something which Trinidad & Tobago has done well over many decades. Trinidad and Tobago has been very successful in attracting investment from international companies which have the highest standards in terms of protecting the health and safety of employees and contractors, communities and the environment.

Given the current revenue situation facing the country it is reasonable for the Government to want to revisit some of the contractual arrangements in the sector where there is an opportunity to receive higher economic rents. In the Spotlight on Energy hosted by the Ministry of Energy and Energy Industries, the Government specifically cited the marketing agreements for LNG. The fact that the marketing contracts for LNG from Train I come to an end this year provides the opportunity to renegotiate those contracts to ensure that more value flows back to Trinidad & Tobago.

The Government has also stated that it would like to revisit the existing marketing arrangements for LNG processed through Trains 2/3 and 4. The Chamber recognises the rights of parties to respectfully revisit contracts or regulations when conditions change. In any renegotiations, the Government must be mindful of our well-deserved reputation as a jurisdiction that fully respects commercial contracts. We must ensure that this reputation is preserved or even strengthened in this process. In this regard, we were pleased by the relevant statements made during the Prime Minister’s closing remarks which suggest that he is so minded.

The Energy Chamber welcomes the renewed focus of the Government on local content, defined as the local value added to goods, works and services measured as the amount of money or percentage of each dollar of expenditure remaining in Trinidad and Tobago after the production of the good or performance of the work or service. The Energy Chamber has championed increased local content for many years and we hope that the renewed focus on this issue by the Ministry of Energy will be sustained and will move beyond a statement of intent to definitive actions that will assist value retention in country.

There were many other policy issues that were addressed during the Spotlight on Energy, including clarity on the decision that NGC will remain as the sole aggregator of gas for the petrochemical, electricity and steel sectors. Implementation of many of the policy positions announced at the event will require significant consultation among firms in these sectors, the Ministry of Energy and Energy Industries and other stakeholders. The Energy Chamber is committed to assisting in any way desired by the parties involved with the aim of building collaborative and mutually beneficial relationships for the continued development of Trinidad & Tobago.